<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-3252
LEXINGTON PRECISION CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 22-1830121
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
767 THIRD AVENUE, NEW YORK, NY 10017
(Address of principal executive office) (Zip Code)
(212) 319-4657
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since last
report date)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[ ]
COMMON STOCK, $0.25 PAR VALUE, 4,263,036 SHARES AS OF
AUGUST 6, 1999
(INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE
ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE)
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<PAGE> 2
LEXINGTON PRECISION CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.................................................2
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................14
Item 3. Quantitative and Qualitative Disclosures about Market Risk..........25
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.................26
Item 6. Exhibits and Reports on Form 8-K....................................26
<PAGE> 3
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEET
(THOUSANDS OF DOLLARS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998
------------ -----------
ASSETS:
<S> <C> <C>
Current assets:
Cash $ 309 $ 103
Accounts receivable 20,953 17,837
Inventories 9,906 10,170
Prepaid expenses and other assets 2,116 2,063
Deferred income taxes 2,025 2,025
-------- --------
Total current assets 35,309 32,198
-------- --------
Plant and equipment:
Land 1,534 1,549
Buildings 23,164 23,753
Equipment 91,682 90,306
-------- --------
116,380 115,608
Accumulated depreciation 54,576 52,871
-------- --------
Plant and equipment, net 61,804 62,737
-------- --------
Excess of cost over net assets of businesses acquired, net 8,620 8,778
-------- --------
Other assets, net 4,564 4,612
-------- --------
$110,297 $108,325
======== ========
</TABLE>
See notes to consolidated financial statements. (continued on next page)
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<PAGE> 4
<TABLE>
<CAPTION>
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEET (CONTINUED)
(THOUSANDS OF DOLLARS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT:
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 9,210 $ 11,291
Accrued expenses 10,013 9,345
Short-term debt 17,619 12,995
Current portion of long-term debt 46,013 6,597
--------- ---------
Total current liabilities 82,855 40,228
--------- ---------
Long-term debt, excluding current portion 32,647 74,953
--------- ---------
Deferred income taxes and other long-term liabilities 2,237 2,220
--------- ---------
Redeemable preferred stock, $100 par value, at
redemption value 750 750
Excess of redemption value over par value (375) (375)
--------- ---------
Redeemable preferred stock at par value 375 375
--------- ---------
Stockholders' deficit:
Common stock, $0.25 par value, 10,000,000 shares
authorized, 4,348,951 shares issued 1,087 1,087
Additional paid-in-capital 12,220 12,235
Accumulated deficit (20,907) (22,556)
Cost of common stock in treasury, 85,915 shares (217) (217)
--------- ---------
Total stockholders' deficit (7,817) (9,451)
--------- ---------
$ 110,297 $ 108,325
========= =========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE> 5
<TABLE>
<CAPTION>
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------- -----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 36,042 $ 31,024 $ 70,538 $ 63,221
Cost of sales 29,691 26,090 59,095 53,502
-------- -------- -------- --------
Gross profit 6,351 4,934 11,443 9,719
Selling and administrative expenses 3,257 2,863 6,323 5,666
-------- -------- -------- --------
Income from operations 3,094 2,071 5,120 4,053
Interest expense 2,408 2,448 4,750 4,850
-------- -------- -------- --------
Income (loss) before income taxes and
extraordinary item 686 (377) 370 (797)
Income tax provision 171 -- 92 --
-------- -------- -------- --------
Net income (loss) before extraordinary item 515 (377) 278 (797)
Extraordinary gain on repurchase of long-term debt,
net of applicable income taxes -- -- 1,371 --
-------- -------- -------- --------
Net income (loss) $ 515 $ (377) $ 1,649 $ (797)
======== ======== ======== ========
Basic net income (loss) per common share:
Net income (loss) before extraordinary item $ 0.12 $ (0.09) $ 0.06 $ (0.20)
Extraordinary gain -- -- 0.32 --
-------- -------- -------- --------
Net income (loss) $ 0.12 $ (0.09) $ 0.38 $ (0.20)
======== ======== ======== ========
Diluted net income (loss) per common share:
Net income (loss) before extraordinary item $ 0.11 $ (0.09) $ 0.06 $ (0.20)
Extraordinary gain -- -- 0.32 --
-------- -------- -------- --------
Net income (loss) $ 0.11 $ (0.09) $ 0.38 $ (0.20)
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
<TABLE>
<CAPTION>
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30
---------------------------------
1999 1998
---- ----
OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 1,649 $ (797)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary gain on repurchase of long-term debt (1,828) --
Depreciation 5,394 4,763
Amortization included in operating expense 837 632
Amortization included in interest expense 108 99
Changes in operating assets and liabilities that provided (used) cash:
Trade receivables (3,116) 1,604
Inventories 264 (1,434)
Prepaid expenses and other assets (53) 943
Trade accounts payable (2,081) (614)
Accrued expenses 668 673
Other 423 16
-------- --------
Net cash provided by operating activities 2,265 5,885
-------- --------
INVESTING ACTIVITIES:
Purchases of plant and equipment (5,005) (8,849)
Decrease in equipment deposits 142 244
Proceeds from sales of equipment 20 183
Expenditures for tooling owned by customers (512) (427)
Other -- 343
-------- --------
Net cash used by investing activities (5,355) (8,506)
-------- --------
FINANCING ACTIVITIES:
Net increase in short-term debt 4,624 1,824
Proceeds from issuance of long-term debt 10,244 3,741
Repayment of long-term debt (9,326) (2,964)
Repurchase of long-term debt (1,980) --
Other (266) (17)
-------- --------
Net cash provided by financing activities 3,296 2,584
-------- --------
Net increase (decrease) in cash 206 (37)
Cash at beginning of period 103 208
-------- --------
Cash at end of period $ 309 $ 171
======== ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The unaudited interim consolidated financial statements include the
accounts of Lexington Precision Corporation and its subsidiaries (collectively,
the "Company"). The financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
the financial statements do not include all the information and footnotes
included in the Company's annual consolidated financial statements. Significant
accounting policies followed by the Company are set forth in Note 1 to the
consolidated financial statements in the Company's annual report on Form 10-K
for the year ended December 31, 1998.
In the opinion of management, the unaudited interim consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company at June 30, 1999, the Company's results of
operations for the three-month and six-month periods ended June 30, 1999 and
1998, and the Company's cash flows for the six-month periods ended June 30, 1999
and 1998. All such adjustments were of a normal recurring nature.
The results of operations for the three-month and six-month periods
ended June 30, 1999, are not necessarily indicative of the results to be
expected for the full year or for any succeeding quarter.
The Company's consolidated financial statements have been presented on
a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Indebtedness
totaling $38,129,000 matures during the first and second quarters of 2000. The
Company's operations will not generate cash sufficient to satisfy such
obligations at their maturities. The Company may attempt to refinance these
obligations (and possibly other indebtedness that has later maturity dates) by
issuing new debt securities in the private or public market. If, for any reason,
the Company is not able to, or determines not to, sell such debt securities, the
Company may, in the alternative, attempt to extend the maturity dates of its
existing debt securities or to exchange new debt securities that have maturity
dates later than 2000 for existing debt securities that mature in 2000. The
Company's ability to refinance, extend, or exchange these securities on or
before their maturity dates will depend on many factors, including, but not
limited to, conditions in the market for non-investment grade debt. Accordingly,
there can be no assurance that the Company will be successful in refinancing,
extending, or exchanging such securities. In the event that the Company is not
successful in refinancing, extending, or exchanging such debt securities,
defaults may occur under the agreements relating to such securities. If a
default occurs, it may trigger other defaults pursuant to cross-default
provisions under other indebtedness of the Company. Holders of indebtedness on
which defaults exist would be entitled to accelerate the maturity thereof, to
cease making any further advances otherwise permitted under the related credit
facilities, to seek to foreclose upon any assets securing such indebtedness, and
to pursue other remedies. If any such actions were to be taken, the Company
might be required to consider alternatives, including seeking relief from its
creditors. Any such action by creditors could have a material adverse effect
upon the Company. The consolidated financial statements do not include any
adjustments that might result should the Company be unable to refinance, extend,
or exchange these obligations on or before their maturity dates.
The Company has commenced discussions with investment banking firms
relating to the issuance of new debt securities to refinance substantially all
of the Company's existing debt. There can be no assurance that the Company will
undertake such an offering, or that any such offering will be successful. If a
public offering of securities is made, such offering will be made only by means
of a prospectus. If a
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<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
private offering of securities is made, the securities offered will not be
registered under the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration requirements.
NOTE 2 -- INVENTORIES
Inventories at June 30, 1999, and December 31, 1998, are set forth
below (dollar amounts in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Finished goods $ 3,539 $ 4,272
Work in process 3,078 2,834
Raw materials and purchased parts 3,289 3,064
--------- ---------
$ 9,906 $ 10,170
========= =========
</TABLE>
NOTE 3 -- ACCRUED EXPENSES
At June 30, 1999, and December 31, 1998, accrued expenses included
accrued interest expense of $1,772,000 and $1,971,000, respectively.
NOTE 4 -- DEBT
At June 30, 1999, and December 31, 1998, short-term debt consisted of
loans outstanding under the Company's revolving line of credit. At June 30,
1999, and December 31, 1998, $952,000 and $3,850,000, respectively, of loans
outstanding under the revolving line of credit were classified as long-term debt
because they were refinanced under long-term loan agreements before the
consolidated financial statements for the respective periods were issued. At
June 30, 1999, loans outstanding under the revolving line of credit accrued
interest at the prime rate plus 0.25% and the London Interbank Offered Rate
("LIBOR") plus 2.75%.
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<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Long-term debt at June 30, 1999, and December 31, 1998, is set forth
below (dollar amounts in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Long-term secured debt:
Revolving line of credit, prime rate plus 0.25% and LIBOR plus 2.75% $ 952(1) $ 3,850(1)
Term loan, due 2000, 12% 1,370 1,370
Term loans payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturities in 2001, 8.37% 2,804 2,921
Term loans payable in equal monthly principal installments, final
maturities in 2002, LIBOR plus 2.75% 2,210 2,584
Term loan payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2002, 9.37% 1,351 1,404
Term loan payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2002, 9% 2,631 2,732
Term loans payable in equal monthly principal installments, final
maturity in 2002, prime rate plus 0.25% and LIBOR plus 2.75% 2,597 -
Term loan payable in equal monthly principal installments, final
maturity in 2003, prime rate plus 0.25% 681 770
Term loan payable in equal monthly principal installments, final
maturity in 2003, prime rate plus 0.25% and LIBOR plus 2.75% 432(2) 492
Term loan payable in equal monthly principal installments, final
maturity in 2004, LIBOR plus 2.75% 1,181 -
Term loan payable in equal monthly principal installments, final
maturity in 2004, prime rate plus 0.25% and LIBOR plus 2.75% 1,335 1,471
Term loans payable in equal monthly principal installments, final
maturity in 2004, prime rate plus 0.25% and LIBOR plus 2.75% 15,239(2) 18,967
Term loan payable in equal monthly principal installments, final
maturity in 2005, LIBOR plus 2.75% 1,228 1,388
Term loan payable in equal monthly principal installments, final
maturity in 2005, prime rate plus 0.25% and LIBOR plus 2.75% 1,458(2) 1,579
Term loan payable in equal monthly principal installments, final
maturity in 2006, prime rate plus 0.25% 559 -
Term loans payable in equal monthly principal installments, final
maturity in 2006, prime rate plus 0.25% and LIBOR plus 2.75% 5,737(2) 1,300
--------- --------
Total long-term secured debt $ 41,765 $ 40,828
--------- --------
</TABLE>
(continued on next page)
-8-
<PAGE> 10
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(continued from prior page)
JUNE 30, DECEMBER 31,
1999 1998
------------ ----------
<C> <C> <C>
Long-term unsecured debt:
10.5% senior note, due 2000 $ 7,500 $ 7,500
12.75% senior subordinated notes, due 2000 27,912 31,720
14% junior subordinated convertible notes, due 2000, convertible
into 440,000 shares of common stock 1,000 1,000
14% junior subordinated nonconvertible notes, due 2000 347 347
Other unsecured obligations 136 155
------- -------
Total long-term unsecured debt 36,895 40,722
------- -------
Total long-term debt 78,660 81,550
Less current portion 46,013 6,597
------- -------
Total long-term debt, excluding current portion $32,647 $74,953
======= =======
<FN>
(1) Refinanced under long-term agreements before the consolidated
financial statements for the period were issued. Amounts reflected
in current portion are based upon the terms of the new borrowings.
(2) Maturity date can be accelerated by the lender if the Company's
revolving line of credit expires prior to the stated maturity date
of the term loan.
</TABLE>
The loans outstanding under the Company's revolving line of credit and
the secured term loans listed above are collateralized by substantially all of
the assets of the Company, including accounts receivable, inventories,
equipment, certain real estate, and the stock of its wholly-owned subsidiary,
Lexington Rubber Group, Inc.
RESTRICTIVE COVENANTS
Certain of the Company's financing arrangements contain covenants with
respect to the maintenance of minimum levels of working capital, net worth, and
cash flow coverage, and other covenants that place certain restrictions on the
Company's business and operations, including the incurrence or assumption of
additional debt, the sale of all or substantially all of the Company's assets,
the funding of capital expenditures, the purchase of common stock, the
redemption of preferred stock, and the payment of cash dividends. In addition,
substantially all of the Company's financing agreements include cross-default
provisions. During May 1999, a covenant related to the maintenance of net
working capital was amended.
NOTE 5 -- INCOME TAXES
During the first six months of 1999, the Company recorded income tax
expense of $549,000, which consisted of estimated federal alternative minimum
tax and state income tax. Of this amount,
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<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
$457,000 relates to the extraordinary gain on the repurchase of long-term debt,
which is shown net of such income tax expense in the consolidated statement of
operations.
At June 30, 1999, and December 31, 1998, the excess of the Company's
deferred income tax assets over its deferred income tax liabilities was fully
offset by a valuation allowance.
NOTE 6 -- NET INCOME (LOSS) PER COMMON SHARE
The calculations of basic and diluted net income or loss per common
share for the three-month and six-month periods ended June 30, 1999 and 1998,
are set forth below (in thousands, except per share amounts). The pro forma
conversion of the Company's potentially dilutive securities (the 14% junior
subordinated convertible notes and the $8 cumulative convertible redeemable
preferred stock, series B), before giving effect to the extraordinary gain, was
not dilutive for the three-month period ended June 30, 1998, or the six-month
periods ended June 30, 1999 and 1998. As a result, the calculation of diluted
net income or loss per common share set forth below for those periods does not
reflect any pro forma conversion.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30 JUNE 30
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) before extraordinary item $ 515 $ (377) $ 278 $ (797)
Preferred stock dividends (7) (9) (15) (17)
Excess of redemption value over par value of preferred
stock redeemed during year (11) (11) (22) (22)
-------- ------- ------- --------
Numerator for basic net income (loss) per share--income
available to common stockholders before extraordinary
item 497 (397) 241 (836)
Effect of assumed conversion of dilutive securities:
14% junior convertible notes 26 - - -
-------- ------- ------- --------
Numerator for diluted net income (loss) per
share--income available to common stockholders after
assumed conversions and before extraordinary item 523 (397) 241 (836)
Extraordinary gain - - 1,371 -
-------- ------- ------- --------
Numerator for net income (loss) per share--income
available to common stockholders after extraordinary
item and assumed conversions $ 523 $ (397) $ 1,612 $ (836)
======== ======= ======= ========
</TABLE>
(continued on next page)
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<PAGE> 12
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(continued from prior page)
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30 JUNE 30
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Denominator:
Denominator for basic net income (loss) per
share--weighted-average common shares 4,263 4,263 4,263 4,263
Effect of assumed conversion of dilutive securities:
14% junior convertible notes 440 -- -- --
--------- --------- --------- ---------
Denominator for diluted net income (loss) per share and
extraordinary gain--weighted-average common shares
with assumed conversions 4,703 4,263 4,263 4,263
========= ========= ========= =========
Basic net income (loss) per common share:
Net income (loss) before extraordinary item $ 0.12 $ (0.09) $ 0.06 $ (0.20)
Extraordinary gain -- -- 0.32 --
--------- --------- --------- ---------
Basic net income (loss) $ 0.12 $ (0.09) $ 0.38 $ (0.20)
========= ========= ========= =========
Diluted net income (loss) per common share:
Net income (loss) before extraordinary item $ 0.11 $ (0.09) $ 0.06 $ (0.20)
Extraordinary gain -- -- 0.32 --
--------- --------- --------- ---------
Diluted net income (loss) $ 0.11 $ (0.09) $ 0.38 $ (0.20)
========= ========= ========= =========
</TABLE>
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<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 -- SEGMENTS
Information relating to the Company's operating segments and its
corporate office for the three-month and six-month periods ended June 30, 1999
and 1998 is summarized below (dollar amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------- ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES:
Rubber Group $ 26,206 $ 23,242 $ 51,166 $ 47,076
Metals Group 9,836 7,782 19,372 16,145
--------- --------- --------- ---------
Total net sales $ 36,042 $ 31,024 $ 70,538 $ 63,221
========= ========= ========= =========
INCOME (LOSS) FROM OPERATIONS:
Rubber Group $ 4,117 $ 3,923 $ 7,433 $ 7,658
Metals Group (294) (1,334) (989) (2,593)
Corporate office (729) (518) (1,324) (1,012)
--------- --------- --------- ---------
Total income from operations $ 3,094 $ 2,071 $ 5,120 $ 4,053
========= ========= ========= =========
ASSETS:
Rubber Group $ 69,635 $ 65,894 $ 69,635 $ 65,894
Metals Group 37,651 38,906 37,651 38,906
Corporate office 3,011 1,189 3,011 1,189
--------- --------- --------- ---------
Total assets $ 110,297 $ 105,989 $ 110,297 $ 105,989
========= ========= ========= =========
DEPRECIATION AND AMORTIZATION:
Rubber Group $ 2,061 $ 1,846 $ 4,025 $ 3,603
Metals Group 1,081 938 2,187 1,784
Corporate office 72 54 127 107
--------- --------- --------- ---------
Total depreciation and amortization $ 3,214 $ 2,838 $ 6,339 $ 5,494
========= ========= ========= =========
CAPITAL EXPENDITURES:
Rubber Group $ 2,532 $ 2,658 $ 3,556 $ 4,651
Metals Group 564 2,747 1,379 4,138
Corporate office 21 57 70 60
--------- --------- --------- ---------
Total capital expenditures $ 3,117 $ 5,462 $ 5,005 $ 8,849
========= ========= ========= =========
</TABLE>
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<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 -- EXTRAORDINARY ITEM
During the first quarter of 1999, the Company recorded an extraordinary
gain, net of estimated income tax expense, of $1,371,000 on the repurchase of
$3,808,000 principal amount of its 12.75% senior subordinated notes.
NOTE 9 -- PLANT CLOSURE
In May 1999, the Company closed a 21,000 square foot diecasting
facility in Manchester, New York. For the six-month periods ended June 30, 1999
and 1998, the Manchester facility had net sales of $894,000 and $1,258,000,
respectively, and losses from operations of $214,000 and $102,000, respectively.
At June 30, 1999, the Manchester facility had net assets, before deducting
indebtedness secured by the assets of the Manchester facility, of $224,000.
The Company presently anticipates that it will complete the disposal of
the assets of the facility during 1999. During the second quarter of 1999, the
Company recorded expenses related to the closure and disposal of the facility in
the amount of $590,000, of which $535,000 was charged to cost of sales and
$55,000 was charged to selling and administrative expenses. The expenses
included $335,000 for the write-down of plant and equipment, $107,000 of
employee severance payments, and $148,000 of other plant closing costs.
-13-
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Various statements in this Item 2 that are not historical facts are
"forward-looking statements," as such term is defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements usually can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "anticipates," "estimates," "projects," or
the negative thereof. They may include discussions of strategy, which involves
risks and uncertainties, and they typically are based upon projections and
estimates, as distinct from past or historical facts and events.
Forward-looking statements are subject to a number of risks,
uncertainties, contingencies, and other factors that could cause the actual
results or performance of the Company to be materially different from the future
results or performance expressed in or implied by such statements. Such risks
and uncertainties for the Company include (1) increases and decreases in
business awarded to the Company by its various customers, (2) unanticipated
price reductions for the Company's products as a result of competition,
(3) unanticipated operating results and cash flows, (4) increases or decreases
in capital expenditures, (5) unforeseen product liability claims, (6) changes in
economic conditions, (7) changes in the competitive environment, (8) changes in
the capital markets, (9) labor interruptions at the Company or at its customers,
(10) disruptions that may be caused by year 2000 software or hardware problems,
and (11) the inability of the Company to obtain additional borrowings or to
refinance its existing indebtedness.
Because the Company operates with substantial financial leverage and
limited liquidity, the impact of any negative event may have a greater adverse
effect upon the Company than if the Company operated with lower financial
leverage and greater liquidity.
The results of operations for any particular fiscal period of the
Company are not necessarily indicative of the results to be expected for any one
or more succeeding fiscal periods. Consequently, the use of forward-looking
statements should not be regarded as a representation that any such projections
or estimates will be realized, and actual results may vary materially. There can
be no assurance that any of the forward-looking statements contained herein will
prove to be accurate.
All forward-looking statements, projections, or estimates attributable
to the Company are expressly qualified by the foregoing cautionary statements.
RESULTS OF OPERATIONS -- SECOND QUARTER OF 1999 VERSUS SECOND QUARTER OF 1998
The Company manufactures, to customer specifications, component parts
through two operating segments, the Rubber Group and the Metals Group. The
Rubber Group consists of four divisions, Lexington Connector Seals, Lexington
Insulators, Lexington Medical, and Lexington Technologies. The Metals Group
consists of three divisions, Lexington Die Casting and the Arizona and New York
Divisions of Lexington Machining.
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<PAGE> 16
RUBBER GROUP
The Rubber Group manufactures silicone and organic rubber components
primarily for automotive industry customers. Any material reduction in the level
of activity in the automotive industry may have a material adverse effect on the
results of operations of the Rubber Group and the Company.
The following table sets forth the operating results of the Rubber
Group for the second quarters of 1999 and 1998 (dollar amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
-----------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C> <C> <C>
Net sales $ 26,206 100.0% $ 23,242 100.0%
Cost of sales 20,420 77.9 17,769 76.5
--------- ------- --------- -------
Gross profit 5,786 22.1 5,473 23.5
Selling and administrative expenses 1,669 6.4 1,550 6.7
--------- ------- --------- -------
Income from operations $ 4,117 15.7% $ 3,923 16.9%
========= ======= ========= =======
</TABLE>
During the second quarter of 1999, net sales of the Rubber Group
increased by $2,964,000, or 12.8%, compared to the second quarter of 1998. This
increase was primarily due to increased unit sales of seals for automotive
wiring systems and insulators for automotive ignition wire sets and, to a lesser
extent, increased unit sales of components for medical devices, offset, in part,
by reduced sales of tooling and by price reductions on certain automotive
components.
During the second quarter of 1999, income from operations totaled
$4,117,000, an increase of $194,000, or 4.9%, compared to the second quarter of
1998. The Rubber Group's operating results for the second quarter of 1998
included a credit to cost of sales of $622,000 resulting from a special rebate
from the State of Ohio Bureau of Workers' Compensation, which represented the
Company's share of a distribution of excess funds accumulated by the Bureau.
Excluding the special rebate from the Rubber Group's operating results for the
second quarter of 1998, income from operations increased by $816,000, or 24.7%.
Cost of sales as a percentage of net sales increased during the second quarter
of 1999 compared to the second quarter of 1998, principally as a result of the
rebate, which reduced cost of sales as a percentage of net sales during the
second quarter of 1998 by 2.7 percentage points. The effect of the rebate was
offset by a reduction in tooling sales, which generate little or no gross
profit, and a reduction in direct labor cost as a percentage of net sales, which
resulted primarily from improved operating efficiencies. Excluding the special
rebate, cost of sales as a percentage of net sales decreased from 79.1% to
77.9%.
Selling and administrative expenses as a percentage of net sales
decreased during the second quarter of 1999 compared to the second quarter of
1998, primarily because those expenses are partially fixed in nature.
During the second quarter of 1999, depreciation and amortization at the
Rubber Group totaled $2,061,000, or 7.9% of net sales, compared to $1,846,000,
or 7.9% of net sales, during the second quarter of 1998. During the second
quarter of 1999, earnings before interest, taxes, depreciation, and amortization
("EBITDA") was $6,178,000, an increase of $409,000 compared to the second
quarter of 1998. Excluding the special rebate, EBITDA increased by $1,031,000.
(EBITDA is not a measure of performance under generally accepted accounting
principles. While EBITDA should not be used as a substitute for net income, cash
flows from operating activities, or other operating or cash flow statement
-15-
<PAGE> 17
data prepared in accordance with generally accepted accounting principles,
EBITDA is used by certain investors as supplemental information to evaluate a
company's financial performance, including its ability to incur and/or service
debt. The definition of EBITDA used in this Form 10-Q may not be the same as the
definition of EBITDA used by other companies.)
METALS GROUP
The Metals Group manufactures aluminum and magnesium die castings and
machines aluminum, brass, and steel components primarily for automotive industry
customers. Any material reduction in the level of activity in the automotive
industry may have a material adverse effect on the results of operations of the
Metals Group and the Company.
Since 1997, the Company has been implementing a strategy designed to
improve the profitability and growth potential of the Metals Group by
eliminating the production of a large number of diverse, short-run components
and by building productive capacity to manufacture higher-volume components for
customers in target markets. The repositioning has entailed a shift to a new
customer base and has required that the Company's manufacturing facilities be
structured and equipped to run high-volume parts efficiently and accurately. The
repositioning of the Metals Group has caused the Company to experience
underabsorption of fixed overhead resulting from the cut-back in short-run
business. The Metals Group has incurred expenses for the implementation of
improved quality systems, expenses related to moving and reinstalling equipment,
expenses related to building upgrades, costs related to establishing
relationships with major new customers, and costs resulting from inefficiencies
experienced during the rollout of new products. These factors and the fact that
new, high-volume business is limited at this stage of the transition adversely
affected the results of operations and cash flow of the Metals Group during 1998
and the first six months of 1999.
In May 1999, the Company closed a 21,000 square foot diecasting
facility in Manchester, New York. For the six-month periods ended June 30, 1999
and 1998, the Manchester facility had net sales of $894,000 and $1,258,000,
respectively, and losses from operations of $214,000 and $102,000, respectively.
At June 30, 1999, the Manchester facility had net assets, before deducting
indebtedness secured by the assets of the Manchester facility, of $224,000.
The Company presently anticipates that it will complete the disposal of
the assets of the facility during 1999. During the second quarter of 1999, the
Company recorded expenses related to the closure and disposal of the facility in
the amount of $590,000, of which $535,000 was charged to cost of sales and
$55,000 was charged to selling and administrative expenses. The expenses
included $335,000 for the write-down of plant and equipment, $107,000 of
employee severance payments, and $148,000 of other plant closing costs.
The following table sets forth the operating results of the Metals
Group for the second quarters of 1999 and 1998 (dollar amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
-----------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C> <C> <C>
Net sales $ 9,836 100.0% $ 7,782 100.0%
Cost of sales 9,271 94.3 8,321 106.9
-------- ------- --------- -------
Gross profit (loss) 565 5.7 (539) (6.9)
Selling and administrative expenses 859 8.7 795 10.2
-------- ------- --------- -------
Loss from operations $ (294) (3.0)% $ (1,334) (17.1)%
======== ======= ========= =======
</TABLE>
-16-
<PAGE> 18
During the second quarter of 1999, net sales of the Metals Group
increased by $2,054,000, or 26.4%, compared to the second quarter of 1998. This
increase resulted primarily from increased net sales of automotive components at
Lexington Die Casting and increased net sales of automotive airbag components at
the Arizona Division of Lexington Machining.
Excluding the $590,000 of closure expenses related to the Manchester
facility, the Metals Group recorded income from operations of $296,000 during
the second quarter of 1999, compared to a loss from operations of $1,334,000
during the second quarter of 1998. Excluding the $535,000 of Manchester closure
expenses charged to cost of sales, cost of sales as a percentage of net sales
decreased from 106.9% during the second quarter of 1998 to 88.8% during the
second quarter of 1999, primarily due to (1) increased absorption of fixed
manufacturing overhead, which resulted from higher sales levels, (2) a reduction
in direct labor costs as a percentage of net sales, which resulted from improved
operating efficiencies and increased utilization of skilled equipment operators
who had been retained during prior periods of lower sales volume, (3) a
reduction in employee benefit costs, which resulted from an improved loss
history, and (4) a reduction in operating supply costs, which resulted primarily
from in-house production of perishable tooling. Such reductions were offset, in
part, by an increase in material costs as a percentage of net sales, which
resulted from increased sales of tooling at Lexington Die Casting, and by
increased depreciation and amortization expenses.
Selling and administrative expenses as a percentage of net sales
decreased during the second quarter of 1999, primarily because those expenses
are partially fixed in nature. Excluding the $55,000 of Manchester closure
expenses charged to selling and administrative expenses, selling and
administrative expenses were 8.2% of net sales during the second quarter of
1999.
During the second quarter of 1999, depreciation and amortization at the
Metals Group totaled $1,081,000, or 11.0% of net sales, compared to $938,000, or
12.1% of net sales, during the second quarter of 1998. EBITDA increased to
$787,000 an increase of $1,183,000 compared to the second quarter of 1998.
Excluding the $590,000 of closure expenses related to the Manchester facility,
EBITDA was $1,377,000.
CORPORATE OFFICE
Corporate office expenses, which are consolidated with selling and
administrative expenses of the Rubber Group and the Metals Group in the
Company's consolidated financial statements, totaled $729,000 and $518,000
during the second quarters of 1999 and 1998, respectively. The increase in
corporate office expenses during the second quarter of 1999 resulted primarily
from the accrual of management incentive compensation. No management incentive
compensation was accrued for corporate office personnel during the second
quarter of 1998.
During the second quarters of 1999 and 1998, depreciation at the
corporate office totaled $14,000 and $5,000, respectively.
INTEREST EXPENSE
During the second quarters of 1999 and 1998, interest expense totaled
$2,408,000 and $2,448,000, respectively.
-17-
<PAGE> 19
INCOME TAXES
During the second quarter of 1999, the Company recorded income tax
expense of $171,000, which consisted of estimated federal alternative minimum
tax and state income tax.
At June 30, 1999, and December 31, 1998, the excess of the Company's
deferred income tax assets over its deferred income tax liabilities was fully
offset by a valuation allowance.
RESULTS OF OPERATIONS -- FIRST SIX MONTHS OF 1999 VERSUS FIRST SIX MONTHS OF
1998
RUBBER GROUP
The following table sets forth the operating results of the Rubber
Group for the first six months of 1999 and 1998 (dollar amounts in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
-----------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C> <C> <C>
Net sales $ 51,166 100.0% $ 47,076 100.0%
Cost of sales 40,442 79.0 36,391 77.3
--------- ------- --------- -------
Gross profit 10,724 21.0 10,685 22.7
Selling and administrative expenses 3,291 6.4 3,027 6.4
--------- ------- --------- -------
Income from operations $ 7,433 14.5% $ 7,658 16.3%
========= ======= ========= =======
</TABLE>
During the first six months of 1999, net sales of the Rubber Group
increased by $4,090,000, or 8.7%, compared to the first six months of 1998. This
increase was primarily due to increased unit sales of seals for automotive
wiring systems and insulators for automotive ignition wire sets and, to a lesser
extent, increased unit sales of components for medical devices, offset, in part,
by reduced sales of tooling and by price reductions on certain automotive
components.
During the first six months of 1999, income from operations totaled
$7,433,000, a decrease of $225,000, or 2.9%, compared to the first six months of
1998. The Rubber Group's operating results for the first six months of 1998
included a credit to cost of sales of $622,000 resulting from a special rebate
from the State of Ohio Bureau of Workers' Compensation, which represented the
Company's share of a distribution of excess funds accumulated by the Bureau.
Excluding the special rebate from the Rubber Group's operating results for the
first six months of 1998, income from operations increased by $397,000 or 5.6%.
Cost of sales as a percentage of net sales increased during the first six months
of 1999 compared to the first six months of 1998, principally as a result of the
rebate, which reduced cost of sales as a percentage of net sales during the
first six months of 1998 by 1.3%. Excluding the special rebate, cost of sales as
a percentage of net sales increased from 78.6% to 79.0%.
Selling and administrative expenses as a percentage of net sales were
unchanged during the first six months of 1999 compared to the first six months
of 1998.
During the first six months of 1999, depreciation and amortization at
the Rubber Group totaled $4,025,000, or 7.9% of net sales, compared to
$3,603,000, or 7.7% of net sales, during the first six months of 1998. During
the first six months of 1999, EBITDA was $11,458,000, an increase of $197,000
compared to first six months of 1998. Excluding the special rebate, EBITDA
increased by $819,000.
-18-
<PAGE> 20
METALS GROUP
The following table sets forth the operating results of the Metals
Group for the first six months of 1999 and 1998 (dollar amounts in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
----------------------------------------
1999 1998
----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 19,372 100.0% $ 16,145 100.0%
Cost of sales 18,653 96.3 17,111 106.0
--------- ------- -------- -------
Gross profit (loss) 719 3.7 (966) (6.0)
Selling and administrative expenses 1,708 8.8 1,627 10.1
--------- ------- -------- -------
Loss from operations $ (989) (5.1)% $ (2,593) (16.1)%
========= ======= ======== =======
</TABLE>
During the first six months of 1999, net sales of the Metals Group
increased by $3,227,000, or 20.0%, compared to the first six months of 1998.
This increase resulted primarily from increased net sales of automotive
components at Lexington Die Casting and to a lesser extent from increased net
sales of automotive airbag components at the Arizona Division of Lexington
Machining.
Excluding the $590,000 of closure expenses related to the Manchester
facility, the Metals Group incurred a loss from operations of $399,000 during
the first six months 1999, compared to a loss from operations of $2,593,000
during the first six months 1998. Excluding the $535,000 of the Manchester
closure expenses charged to cost of sales, cost of sales as a percentage of net
sales decreased from 106.0% during the first six months of 1998 to 93.5% during
the first six months of 1999, primarily due to (1) increased absorption of fixed
manufacturing overhead, which resulted from higher sales levels, (2) a reduction
in direct labor costs as a percentage of net sales, which resulted from improved
operating efficiencies and increased utilization of skilled equipment operators
who had been retained during prior periods of lower sales volume, (3) a
reduction in employee benefit costs, which resulted from an improved loss
history, and (4) a reduction in operating supply costs, which resulted primarily
from in-house production of perishable tooling. Such reductions were offset, in
part, by an increase in material costs as a percentage of net sales, which
resulted from increased sales of tooling at Lexington Die Casting, and by
increased depreciation and amortization expenses.
Selling and administrative expenses as a percentage of net sales
decreased during the first six months of 1999, primarily because those expenses
are partially fixed in nature.
During the first six months of 1999, depreciation and amortization at
the Metals Group totaled $2,187,000, or 11.3% of net sales, compared to
$1,784,000, or 11.0% of net sales, during the first six months of 1998. EBITDA
increased to $1,198,000 an increase of $2,007,000 compared to the first six
months of 1998. Excluding the $590,000 of closure expenses related to the
Manchester facility, EBITDA was $1,788,000.
CORPORATE OFFICE
Corporate office expenses, which are consolidated with selling and
administrative expenses of the Rubber Group and the Metals Group in the
Company's consolidated financial statements, totaled $1,324,000 and $1,012,000
during the first six months of 1999 and 1998, respectively. The increase in
corporate office expenses during the first six months of 1999 resulted primarily
from the accrual of
-19-
<PAGE> 21
management incentive compensation. No management incentive compensation was
accrued for corporate office personnel during the second quarter of 1998.
During the first six months 1999 and 1998, depreciation at the
corporate office totaled $19,000 and $8,000, respectively.
INTEREST EXPENSE
During the first six months of 1999 and 1998, interest expense totaled
$4,750,000 and $4,850,000, respectively.
EXTRAORDINARY GAIN
During the first six months of 1999, the Company recorded an
extraordinary gain, net of estimated income tax expense, of $1,371,000 on the
repurchase of $3,808,000 principal amount of its 12.75% senior subordinated
notes.
INCOME TAXES
During the first six months of 1999, the Company recorded income tax
expense of $549,000, which consisted of estimated federal alternative minimum
tax and state income tax. Of this amount $457,000 relates to the extraordinary
gain on the repurchase of long-term debt, which is shown net of such income tax
expense in the consolidated statement of operations.
At June 30, 1999, and December 31, 1998, the excess of the Company's
deferred income tax assets over its deferred income tax liabilities was fully
offset by a valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
During the first six months of 1999, the operating activities of the
Company provided $2,265,000 of cash.
Accounts receivable increased by $3,116,000. This increase was caused
primarily by the increase in net sales and by a change in the timing of payments
from the Company's largest customer. Trade accounts payable decreased by
$2,081,000. This decrease was caused primarily by a reduction in average days
outstanding and by a $700,000 reduction in payables related to the purchase of
plant, equipment, and customer-owned tooling, which resulted from a reduction in
capital expenditures compared to the first six months of 1998.
INVESTING ACTIVITIES
During the first six months of 1999, the investing activities of the
Company used $5,355,000 of cash, primarily for capital expenditures. Capital
expenditures attributable to the Rubber Group, the Metals Group, and the
corporate office totaled $3,556,000, $1,379,000, and $70,000, respectively. The
Company presently projects that capital expenditures will total approximately
$13,500,000 in 1999, including $13,100,000 for equipment and $400,000 for land
and buildings. Capital expenditures for the Rubber Group, the Metals Group, and
the corporate office are projected to total $9,000,000, $4,400,000, and
$100,000, respectively. At June 30, 1999, the Company had outstanding
commitments to purchase plant and equipment of $1,594,000.
-20-
<PAGE> 22
FINANCING ACTIVITIES
During the first six months of 1999, the financing activities of the
Company provided $3,296,000 of cash.
During the first six months of 1999, the Company obtained new term
loans in the aggregate amount of $10,244,000, which refinanced $2,090,000 of
existing term loans and $8,154,000 of loans outstanding under the Company's
revolving line of credit. Also, during the first six months, the Company
repurchased $3,808,000 principal amount of its 12.75% senior subordinated notes
for $1,980,000; the purchase was financed through borrowings under the Company's
revolving line of credit.
LIQUIDITY
The Company finances its operations with cash from operating activities
and a variety of financing arrangements, including term loans and loans under a
revolving line of credit. The Company's ability to borrow under its revolving
line of credit is subject to, among other things, covenant compliance and
certain availability formulas based on the levels of the Company's accounts
receivable and inventories. In January 1999, the revolving line of credit was
amended to extend its expiration date to April 1, 2002. Also in January 1999,
one of the Company's lenders provided the Company with an equipment line of
credit in the amount of $5,000,000, which can be used to finance a portion of
the cost of certain equipment. On August 2, 1999, the Company borrowed $845,000
under this line of credit, leaving $4,155,000 available to finance future
equipment purchases. In March 1999, another of the Company's lenders provided
the Company with an equipment line of credit in the amount of $1,822,000. On
July 29, 1999, the Company borrowed $450,000 under this line of credit,
utilizing substantially all of the remaining availability under this equipment
line of credit.
The Company operates with substantial financial leverage and limited
liquidity. During the first six months of 1999, the Company's aggregate
indebtedness, excluding trade accounts payable, increased by $1,734,000 to
$96,279,000. During the second half of 1999, interest and scheduled principal
payments are projected to be approximately $4,700,000 and $4,000,000,
respectively.
The Company had a net working capital deficit of $47,546,000 at
June 30, 1999, compared to a net working capital deficit of $8,030,000 at
December 31, 1998. The increase occurred primarily because the Company's 12%
term note, 10.5% senior note, 12.75% senior subordinated notes, and 14% junior
subordinated notes which have an aggregate principal balance of $38,219,000,
mature during the first half of 2000 and have been classified at June 30, 1999,
as current liabilities in the Company's consolidated financial statements.
Loans of $17,619,000 and $12,995,000 outstanding under the revolving line of
credit were classified as short-term debt at June 30, 1999 and December 31,
1998, respectively. Although the expiration date of the revolving line of
credit is April 1, 2002, these loans have been classified as current
liabilities because the Company's cash receipts are automatically used to
reduce such loans on a daily basis, by means of a lock-box sweep arrangement,
and the lender has the ability to modify certain terms of the revolving line of
credit without the prior approval of the Company.
At August 12, 1999, availability under the Company's revolving line of
credit totaled $1,825,000 before outstanding checks of $1,356,000 were deducted.
Substantially all of the assets of the Company and its subsidiary,
Lexington Rubber Group, Inc., are pledged as collateral for certain of the
Company's indebtedness. Certain of the Company's financing arrangements contain
covenants with respect to the maintenance of minimum levels of working capital,
-21-
<PAGE> 23
net worth, and cash flow coverage and other covenants that place certain
restrictions on the Company's business and operations, including covenants
relating to the incurrence or assumption of additional debt, the level of
past-due trade accounts payable, the sale of all or substantially all of the
Company's assets, the purchase of plant and equipment, the purchase of common
stock, the redemption of preferred stock, and the payment of cash dividends. In
addition, substantially all of the Company's financing agreements include
cross-default provisions.
From time to time, certain of the financial covenants contained in the
Company's various loan agreements have been amended in order to maintain or
otherwise ensure current or future compliance by the Company. In May 1999, a
covenant related to the maintenance of net working capital was amended.
Based upon its most current forecast, the Company believes, although
there can be no assurance, that its cash flows from operations and borrowings
under its revolving line of credit and its equipment lines of credit will be
adequate to meet its working capital and debt service requirements and to fund
projected capital expenditures through December 31, 1999. If cash flows from
operations or availability under the Company's lines of credit fall below
expectations, the Company may be forced to delay planned capital expenditures,
reduce operating expenses, extend trade accounts payable balances beyond terms
that the Company believes are customary in the industries in which it operates,
and/or consider other alternatives designed to improve the Company's liquidity.
Certain of such actions could have a material adverse effect upon the Company.
As discussed previously, indebtedness totaling $38,129,000 matures
during the first and second quarters of 2000. The Company's operations will not
generate cash sufficient to satisfy such obligations at their maturities. The
Company may attempt to refinance these obligations (and possibly other
indebtedness that has later maturity dates) by issuing new debt securities in
the private or public market. If, for any reason, the Company is not able to, or
determines not to, sell such debt securities, the Company may, in the
alternative, attempt to extend the maturity dates of its existing debt
securities or to exchange new debt securities that have maturity dates later
than 2000 for existing debt securities that mature in 2000. The Company's
ability to refinance, extend, or exchange these securities on or before their
maturity dates will depend on many factors, including, but not limited to,
conditions in the market for non-investment grade debt. Accordingly, there can
be no assurance that the Company will be successful in refinancing, extending,
or exchanging such securities. In the event that the Company is not successful
in refinancing, extending, or exchanging such debt securities, defaults may
occur under the agreements relating to such securities. If a default occurs, it
may trigger other defaults pursuant to cross-default provisions under other
indebtedness of the Company. Holders of indebtedness on which defaults exist
would be entitled to accelerate the maturity thereof, to cease making any
further advances otherwise permitted under the related credit facilities, to
seek to foreclose upon any assets securing such indebtedness, and to pursue
other remedies. If any such actions were to be taken, the Company might be
required to consider alternatives, including seeking relief from its creditors.
Any such action by creditors could have a material adverse effect upon the
Company. The consolidated financial statements do not include any adjustments
that might result should the Company be unable to refinance, extend, or exchange
these obligations on or before their maturity dates.
The Company has commenced discussions with investment banking firms
relating to the issuance of new debt securities to refinance substantially all
of the Company's existing debt. There can be no assurance that the Company will
undertake such an offering, or that any such offering will be successful. If a
public offering of securities is made, such offering will be made only by means
of a prospectus. If a private offering of securities is made, the securities
offered will not be registered under the Securities Act
-22-
<PAGE> 24
of 1933 and may not be offered or sold in the United States absent registration
or an applicable exemption from registration requirements.
COMMITMENTS AND CONTINGENCIES
The Company is subject to various claims and legal proceedings covering
a wide range of matters that arise in the ordinary course of its business
activities. It is the Company's policy to record accruals for such matters when
a loss is deemed probable and the amount of such loss can be reasonably
estimated. The various actions to which the Company is a party are at various
stages of completion. Although there can be no assurance as to the outcome of
existing or potential litigation, in the event such litigation were commenced,
based upon the information currently available to the Company, the Company
believes that the outcome of such actions will not have a material adverse
effect upon its financial position.
RECENTLY ISSUED ACCOUNTING STANDARDS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"), which is effective for all
fiscal periods beginning after June 15, 1999. The statement provides standards
for the recognition and measurement of derivative and hedging activities. The
Company believes that the adoption of FAS 133 during the first quarter of 2000
will not affect the results of operations or financial position of the Company.
YEAR 2000
The Company's compliance plan for software and/or hardware failures due
to processing errors potentially arising from calculations using the year 2000
date is set forth in Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, in the Company's annual report on Form 10-K
for the year ended December 31, 1998.
As of June 30, 1999, the Company has completed its year 2000 readiness
program to identify, repair or replace, and test any of its information
technology (software and hardware) (collectively, IT systems) and non-IT
systems, which include embedded technology such as microprocessors commonly
found in modern manufacturing equipment. The Company has also substantially
completed its plan to evaluate the year 2000 readiness of its major trading
partners, including customers and suppliers of materials and services. In
particular, the Company sent comprehensive year 2000 readiness questionaires to
all such partners, and approximately 94% of the Company's major trading partners
have responded. To date, all such respondents have indicated that they are, or
reasonably believe that they will be, year 2000 ready prior to January, 1 2000.
In spite of such assurances, the Company cannot guarantee that all of its major
trading partners are, or will be, year 2000 ready.
Based upon the Company's review of its IT and non-IT systems to date,
the Company believes that there are no material internal issues regarding its
year 2000 compliance that will not be resolved through normal equipment and
software upgrades that will be made through 1999. Although the Company does not
have a system in place for tracking costs related to its year 2000 readiness
plan, the Company believes that through June 30, 1999, approximately $350,000
has been spent to assess, modify,
-23-
<PAGE> 25
or replace non-compliant systems and that an additional $300,000 will be spent
during the six months ending December 31, 1999, to modify or replace
non-compliant systems.
The Company has developed a contingency plan to provide for alternate
methods of processing business information if any of the Company's information
processing systems experiences a year 2000 problem, to attempt to safeguard the
assets of the Company if a utility fails to provide heating fuel or electrical
power, and if deemed appropriate and available, identify alternate sources of
supply for materials and services.
As a major supplier of certain automotive components to Tier 1 and
original equipment automotive manufacturers, the Company believes that its most
reasonably likely worst case scenario resulting from a year 2000 problem would
be the shut down of the factories of one of its suppliers or customers. The
costs resulting from such a shutdown could have a material adverse effect upon
the results of operations and financial position of the Company. The Company has
little or no ability to deal with a risk such as this, which is beyond its
control.
The status of the Company's year 2000 readiness effort as of June 30,
1999, is set forth in the table below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
RESOLUTION PHASES
-------------------------------------------------------------------------------------------
ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INFORMATION 100% complete 98% complete 98% complete 98% complete
TECHNOLOGY
E --------------------------------------------------------------------------------------------------------------
X
P
O OPERATING 100% complete 98% complete 98% complete 98% complete
S EQUIPMENT WITH
U EMBEDDED CHIPS
R OR SOFTWARE
E
--------------------------------------------------------------------------------------------------------------
T
Y PRODUCTS 100% complete 100% complete 100% complete 100% complete
P --------------------------------------------------------------------------------------------------------------
E
THIRD PARTY 94% complete Contingency plans Contingency plans Contingency plans
as deemed necessary as deemed necessary as deemed necessary
are in place are in place are in place
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
While the Company believes its planning efforts are adequate to address
its internal year 2000 concerns, there can be no assurance that the systems of
the Company's major trading partners, on which the Company's systems and
operations rely, will be year 2000 compliant. If a significant number of the
Company's major trading partners experience failures in their computer systems
or operations due to year 2000 non-compliance, such events could have a material
adverse affect on the Company's business, revenues and results of operations.
Furthermore, if for any reason the Company or any of its major trading partners
fail to complete appropriate remediation programs or fail to complete
remediation
-24-
<PAGE> 26
programs on a timely basis, such failure could have a material adverse effect on
the Company's business, revenues and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company does not invest in or trade market risk sensitive
instruments. The Company also does not have any foreign operations or any
significant amount of foreign sales and therefore believes that its exposure to
foreign currency exchange rate risk is minimal.
At June 30, 1999, the Company had $51,228,000 of outstanding floating
rate debt at interest rates of prime plus 0.25% and the London Inter-bank
Offered Rate ("LIBOR") plus 2.75%. Currently the Company does not purchase
derivative financial instruments to hedge or reduce its interest rate risk. As a
result, a change in either the lender's prime rate or LIBOR would affect the
rate at which the Company borrows funds under these respective agreements.
At June 30, 1999, the Company had $45,051,000 of fixed rate long-term
debt outstanding with a weighted-average interest rate of 11.78%, of which
$38,129,000 becomes due during the first and second quarters of 2000. The
Company may attempt to refinance these obligations by issuing new debt
securities in the private or public market. If, for any reason, the Company is
unable to sell such debt securities, the Company may, in the alternative,
attempt to extend the maturity dates of its existing debt securities or to
exchange new debt securities that have maturity dates later than 2000 for
existing debt securities that mature in 2000. The rate of interest at which the
Company may be able to refinance, extend, or exchange the securities coming due
during the first and second quarters of 2000 will depend on many factors,
including, but not limited to, the rate of interest for non-investment grade
debt, and may be significantly higher than the weighted-average interest rate on
the Company's existing fixed rate debt. Also refer to "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity" in
Part I, Item 2.
-25-
<PAGE> 27
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on May 18,
1999.
(b) The matters voted upon at the Annual Meeting and the results of
the voting on each matter are set forth below:
(i) A proposal to elect four directors (Messrs. William B.
Conner, Warren Delano, Kenneth I. Greenstein, and Michael
A. Lubin).
<TABLE>
<S> <C> <C>
Mr. Conner:
Votes for Mr. Conner 3,934,344
Votes withheld from Mr. Conner 17,819
Mr. Delano:
Votes for Mr. Delano 3,933,924
Votes withheld from Mr. Delano 18,239
Mr. Greenstein:
Votes for Mr. Greenstein 3,934,344
Votes withheld from Mr. Greenstein 17,819
Mr. Lubin:
Votes for Mr. Lubin 3,933,924
Votes withheld from Mr. Lubin 18,239
(ii) The ratification of Ernst & Young LLP as independent
auditors of the Company for the year ending December 31,
1999.
Votes for Ernst & Young LLP 3,946,473
Votes against Ernst & Young LLP 2,291
Abstentions 3,399
There were no broker non-votes in respect of the foregoing
matters.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed herewith:
10-1 Promissory Note dated July 29, 1999, between the
Company and The CIT Group/Equipment Financing, Inc.
10-2 New Equipment Note dated July 30, 1999, between
Lexington Rubber Group, Inc. and Congress Financial
Corporation
27-1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the second quarter of 1999.
-26-
<PAGE> 28
LEXINGTON PRECISION CORPORATION
FORM 10-Q
JUNE 30, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LEXINGTON PRECISION CORPORATION
(Registrant)
August 13, 1999 By: /s/ Michael A. Lubin
- --------------- ---------------------------
Date Michael A. Lubin
Chairman of the Board
August 13, 1999 By: /s/ Warren Delano
- --------------- ---------------------------
Date Warren Delano
President
August 13, 1999 By: /s/ Dennis J. Welhouse
- --------------- -----------------------
Date Dennis J. Welhouse
Senior Vice President and
Chief Financial Officer
-27-
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Exhibit Location
------ ------- --------
<S> <C> <C>
10-1 Promissory Note dated July 29, 1999, Filed with this Form 10-Q
between the Company and The CIT
Group/Equipment Financing, Inc.
10-2 New Equipment Note dated July 30, 1999, Filed with this Form 10-Q
between Lexington Rubber Group, Inc. and
Congress Financial Corporation
27-1 Financial Data Schedule Filed with this Form 10-Q
</TABLE>
<PAGE> 1
Exhibit 10-1
PROMISSORY NOTE
New York, New York
$450,000.00 July 29, 1999
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION ("Debtor") promises
to pay to the order of THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT"), at such
address as CIT may designate, in lawful money of the United States, the
principal sum of FOUR HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($450,000.00) in
sixty (60) consecutive monthly installments, commencing on SEPTEMBER 1, 1999
with the following installments on the same day of each month thereafter until
payment in full of this Note. The monthly installments shall be level payments
of principal each in the amount of $7,500.00. Debtor shall pay interest together
with such installment of principal, in like money, from the date hereof until
payment in full, on the unpaid principal balance hereof at an interest rate per
annum equal to two and seventy-five hundredths percent (2.75%) above the LIBOR
Rate. Each payment shall be applied first to the payment of any unpaid interest
on the principal sum and then to payment of principal. Interest shall be
calculated on the basis of a 360-day year and actual number of days elapsed. Any
amount not paid when due under this Note shall bear late charges thereon,
calculated at the Late Charge Rate, from the due date thereof until such amount
shall be paid in full. Any payment received after the maturity of any
installment of principal shall be applied first to the payment of unpaid late
charges, second to the payment of any unpaid interest on said principal, and
third to the payment of principal.
This Note is one of the Notes referred to in the Loan and Security
Agreement dated as of March 19, 1997 between Debtor and CIT (herein, as the same
may from time to time be amended, supplemented or otherwise modified, called the
"Agreement"), is secured as provided in the Agreement, and is subject to
prepayment only as provided therein, and the holder hereof is entitled to the
benefits thereof.
Terms defined in the Agreement shall have the same meaning when used in
this Note, unless the context shall otherwise require.
Except as provided in Section 6 of the Agreement, Debtor hereby waives
presentment, demand of payment, notice of dishonor, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note and hereby consents to any extensions of
time, renewals, releases of any party to this Note, waivers or modifications
that may be granted or consented to by the holder of this Note.
Upon the occurrence of any one or more of the Events of Default
specified in the Agreement, the amounts then remaining unpaid on this Note,
together with any interest accrued, may be declared to be (or, with respect to
certain Events of Default, automatically shall become) immediately due and
payable as provided therein.
In the event that any holder shall institute any action for the
enforcement or the collection of this Note, there shall be immediately due and
payable, in addition to the unpaid balance hereof, all late charges and all
costs and expenses of such action, including reasonable attorneys' fees. In
accordance with the provisions of the Agreement, DEBTOR AND CIT WAIVE TRIAL BY
JURY IN ANY LITIGATION RELATING TO OR IN CONNECTION WITH THIS NOTE IN WHICH THEY
SHALL BE ADVERSE PARTIES, and Debtor hereby waives the right to interpose any
setoff, counterclaim or defense of any nature or description whatsoever, but
Debtor shall have the right to assert in an independent action against CIT any
such defense, offset or counterclaim (including any compulsory counterclaim)
which it may have which has not otherwise been waived pursuant to the Agreement.
<PAGE> 2
Debtor agrees that its liabilities hereunder are absolute and
unconditional without regard to the liability of any other party, and that no
delay on the part of the holder hereof in exercising any power or right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right hereunder preclude other or further exercise
thereof or the exercise of any other power or right.
If at any time this transaction would be usurious under applicable law,
then regardless of any provision contained in the Agreement, in this Note or in
any other agreement made in connection with this transaction, it is agreed that
(a) the total of all consideration which constitutes interest under applicable
law that is contracted for, charged or received upon the Agreement, this Note or
any such other agreement shall under no circumstances exceed the maximum rate of
interest authorized by applicable law and any excess shall be credited to Debtor
and (b) if CIT elects to accelerate the maturity of, or if CIT permits Debtor to
prepay the indebtedness described in, this Note, any amounts which because of
such action would constitute interest may never include more than the maximum
rate of interest authorized by applicable law and any excess interest, if any,
shall be credited to Debtor automatically as of the date of acceleration or
prepayment.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
LEXINGTON PRECISION CORPORATION
By: Warren Delano
---------------------------
Title: President
------------------------
<PAGE> 1
NEW EQUIPMENT TERM NOTE
-----------------------
$845,000 July 30, 1999
FOR VALUE RECEIVED, LEXINGTON RUBBER GROUP, INC., formerly known as
Lexington Components, Inc., a Delaware corporation (the "Debtor"), hereby
unconditionally promises to pay to the order of CONGRESS FINANCIAL CORPORATION,
a Delaware corporation, as successor by merger to Congress Financial
Corporation, a California corporation (the "Payee"), at the offices of Payee at
1133 Avenue of the Americas, New York, New York 10036, or at such other place as
the Payee or any holder hereof may from time to time designate, the principal
sum of EIGHT HUNDRED FORTY-FIVE THOUSAND DOLLARS ($845,000) in lawful money of
the United States of America and in immediately available funds, in eighty-four
(84) consecutive monthly installments (or earlier as hereinafter referred to) on
the first day of each month commencing September 1, 1999, of which the first
eighty-three (83) installments shall each be in the amount of TEN THOUSAND ONE
HUNDRED DOLLARS ($10,100), and the last (i.e. eighty-fourth (84th)) installment
shall be in the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing on
the first day of the month next following the date hereof, and on the first day
of each month thereafter until the indebtedness evidenced by this Note is paid
in full. Interest payable upon and during the continuance of an Event of Default
or following the effective date of termination or non-renewal of the Financing
Agreements shall be payable upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one-quarter of one (1/4%) percent per annum in
excess of the Prime Rate, and as to Eurodollar Rate Loans, a rate of two and
three-quarters (2 3/4%) percent per annum in excess of the Adjusted Eurodollar
Rate; PROVIDED, THAT, at Payee's option, the Interest Rate shall mean a rate of
two and one-quarter (2 1/4%) percent per annum in excess of the Prime Rate as to
Prime Rate Loans and a rate of four and three-quarters (4 3/4%) percent per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans,
upon and during the continuance of an Event of Default or following the
effective date of termination or non-renewal of the Financing Agreements, and
(b) the term "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
Unless otherwise defined herein, all
<PAGE> 2
capitalized terms used herein shall have the meanings assigned thereto in the
Accounts Agreement (as hereinafter defined) and the other Financing Agreements.
The Interest Rate payable hereunder as to Prime Rate Loans shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in such Prime Rate, effective on the first day of the month after
any change in such Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In no
event shall the interest charged hereunder exceed the maximum permitted under
the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of March 11, 1997
between Debtor and Payee, as amended by the letter agreement re: Amendment to
Financing Agreements, dated October 20, 1998, between Debtor and Payee
(collectively, the "Amendment") to evidence a "New Equipment Term Loan" (as
defined in the New Equipment Term Loan Agreement as referred to in and as
modified by the Amendment) made by Payee to Debtor. This Note is secured by the
"Collateral" described in the Accounts Financing Agreement [Security Agreement],
dated January 11, 1990, by and between Payee and Debtor, as amended (the
"Accounts Agreement") and any agreement, document or instrument now or at any
time hereafter executed and/or delivered in connection therewith or related
thereto (the foregoing, as the same now exist or may hereafter be amended,
modified, supplemented, renewed, extended, restated or replaced, are hereinafter
collectively referred to as the "Financing Agreements") and is entitled to all
of the benefits and rights thereof and of the Financing Agreements. At the time
any payment is due hereunder, at its option, Payee may charge the amount thereof
to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or if
the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon, shall
forthwith become due and payable, together with interest accruing thereafter at
the then applicable rate stated above until the indebtedness evidenced by this
Note is paid in full, plus the costs and expenses of collection hereof,
including, but not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce
-2-
<PAGE> 3
payment of this Note and (iii) consents to any one or more extensions or
postponements of time of payment, release, surrender or substitution of
collateral security, or forbearance or other indulgence, without notice or
consent. Upon the occurrence of any Event of Default and during the continuance
thereof, Payee shall have the right, but not the obligation to setoff against
this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a permanent
waiver. Debtor hereby irrevocably consents to the non-exclusive jurisdiction of
the Supreme Court of the State of New York and of the United States District
Court for the Southern District of New York for all purposes in connection with
any action or proceeding arising out of or relating to this Note, the Accounts
Agreement, the other Financing Agreements, the Obligations or the Collateral and
further consents that any process or notice of motion or other application to
said Courts or any judge thereof, or any notice in connection with any
proceeding hereunder may be served (i) inside or outside the State of New York
by registered or certified mail, return receipt requested, and service or notice
so served shall be deemed complete five (5) days after the same shall have been
posted or (ii) in such other manner as may be permissible under the rules of
said Courts. Within thirty (30) days after such mailing, Debtor shall appear in
answer to such process or notice of motion or other application to said Courts,
failing which Debtor shall be deemed in default and judgment may be entered by
Payee against Debtor for the amount of the claim and other relief requested
therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit of
Payee and its successors, endorsees and assigns. If any term or provision of
this Note shall be held invalid, illegal or unenforceable, the validity of all
other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
-3-
<PAGE> 4
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON RUBBER GROUP, INC.
ATTEST:
By: Michael A. Lubin
------------------------------
Carly Strelzik
- -----------------------
Assistant Secretary Title: Chairman
---------------------------
[Corporate Seal]
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from financial statements and is qualified in
its entirety by reference to such financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 309
<SECURITIES> 0
<RECEIVABLES> 20,953
<ALLOWANCES> 0
<INVENTORY> 9,906
<CURRENT-ASSETS> 35,309
<PP&E> 116,380
<DEPRECIATION> 54,576
<TOTAL-ASSETS> 110,297
<CURRENT-LIABILITIES> 82,855
<BONDS> 32,647
375
0
<COMMON> 1,087
<OTHER-SE> (8,904)
<TOTAL-LIABILITY-AND-EQUITY> 110,297
<SALES> 70,538
<TOTAL-REVENUES> 70,538
<CGS> 59,095
<TOTAL-COSTS> 59,095
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,750
<INCOME-PRETAX> 370
<INCOME-TAX> 92
<INCOME-CONTINUING> 278
<DISCONTINUED> 0
<EXTRAORDINARY> 1,371
<CHANGES> 0
<NET-INCOME> 1,649
<EPS-BASIC> .38
<EPS-DILUTED> .38
</TABLE>
